CORPORATION LAW

I. GENERAL

A. DEFINITION1) TESTATE ESTATE OF IDONAH SLADE PERKINS deceased. RENATO TAYAG ancillary administrator-appellee v BENGUET CONSOLIDATED INC.FERNANDO, 1968FACTS

Idonah Slade Perkins died, leaving two stock certificates covering 33,002 shares in Benguet Consolidated. The domiciliary administrator of her estate (Country Trust Company of New York [CTC]) and the ancillary administrator of her estate (Renato Tayag) argued over the possession of the shares. CTC would not surrender the shares, prodding Tayag to file a petition to declare the stock certificates lost. This was granted by the CFI, that declared the stock certificates lost, ordered them cancelled, and directed that Benguet Consolidated issue new certificates to be delivered to Tayag or the Probate Court.

Benguet Consolidated, a Philippine corporation, appealed. They did not appeal on the issue of entitlement to the stock certificates, but rather on their declaration as lost because a) they existed and were in the presence of the CTC and b) there was a failure to observe requirements of its by-laws before new stock certificates could be issued.

ISSUES

WON Benguet Consolidated could appeal / ignore a court decision on the basis of its own by-laws?RULING/RATIO:

NO. A corporation cannot choose which court order to follow and disregard. A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state according to law. It is logically inconceivable therefore that it will have rights and privileges of a higher priority than that of its creator.Definitions of a CorporationA corporation is an artificial being created by operation of law. It owes its life to the state, its birth being purely dependent on its will.Berle

Classically a corporation was conceived as an artificial person, owing its existence through creation by a sovereign power.

Chief Justice Marshall (Dartmouth College Decision)

An artificial being, invisible, intangible, and existing only in contemplation of law.

Fletcher

A corporation is not in fact and in reality a person, but the law treats it as though it were a person by process of fiction, or by regarding it as an artificial person created by law for certain specific purposes, the extent of whose existence, powers, and liberties is fixed by its charter.

Dean Pound

A juristic person, resulting from an association of human beings granted legal personality by the state.

Rejection of Gierke'sgenossenchafttheoryThe reality of the group as a social and legal entity, independent of state recognition and concession.2) MONFORT HERMANOS AGRICULTURAL DEVELOPMENT vs ANTONIO MONFORT III

and

ANTIONIO MONFORT III V COURT OF APPEALS

YNARES-SANTIAGO, 2004

FACTS

Monfort Corporation was a domestic private corporation. It owned a farm, fishpond an sugar cane plantation, car and two tractors. Ramon Monfort (EVP) also bred fighting cocks in his personal capacity. The group of Antonio Monfort III through force and intimidation allegedly took possession of the Haciendas, produce, motor vehicles, and fighting cocks.

Ma. Antonia Salvatierra filed two cases on behalf of the Corporation, 1) complaint for delivery of motor vehicle, tractors, and 378 fighting cocks. 2) forcible entry, preliminary mandatory injunction with TRO, and restraining order and damages.

ISSUES

WON Antonia Salvatierra had the legal capacity to sue on behalf of the corporation.RULING/RATIO:

No. The by-laws of the corporation indicate a general information sheet shall be published with the names of elected directors and officers. The names of the last four signatories to the board resolution authorizing Antonia Salvatierra and/or Ramon Monfort to represent the corporation did not appear in the General Information Sheet. Thus, there is a doubt as to whether they were indeed duly elected members of the board.

A corporation has no power except those expressly conferred on it by the Corporation Code and that are implied or incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents. The power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers. In turn, physical acts of the corporation like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.3) PHILIPPINE STOCK EXCHANGE vs. CA

Torres, Jr. (1997)

FACTS:

Puerto Azul Land, Inc. (PALI) wanted to offer its shares to the public in order to raise funds. PALI was able to secure from the Securities and Exchange Commission (SEC) a Permit to Sell its shares to the public. As it sought to course the trading of its shares through the Philippine Stock Exchange Commission, Inc (PSE), PALI filed with the PSE an application to list its shares. However, before the PSE could decide on the said application, the heirs of Ferdinand Marcos sent a letter to the PSE claiming that they were the legal and beneficial owners of certain properties of PALI. The heirs wanted PALIs application to be deferred. As a result, PSE rejected PALIs application.

PALI then wrote a letter to the SEC (in the exercise of its supervisory and regulatory powers) requesting the latter to review PSEs action on the listing application. The SEC set aside PSEs decision and ordered the listing of PALIs shares.

PSE filed a petition for review with the CA. The CA dismissed the said petition stating that the PSE as a corporation and a stock exchange is under the SECs jurisdiction, regulation and control.

The PSE argued that the power of the SEC over stock exchanges is more limited as compared to its authority over ordinary corporations. Under the business judgment rule, the SEC and the courts are barred from intruding into the business judgments of corporations, when the same are made in good faith (or absent a showing of bad faith). Thus, the discretion to accept or reject the application still lies with the PSE.

ISSUE:

1. WON the SEC has the authority to order the PSE to list the shares of PALI in the stock exchange?

RATIO:

1. Yes, it has but its authority to do so is limited.

The PSE is not an ordinary corporation as it is the only operational stock exchange in the country. The SEC, on the other hand, has absolute jurisdiction, supervision and control over all corporations who are grantees of primary franchises, licenses and/or permits issued by the government to operate in the Philippines (Sec 3, PD 902-A). It is the SECs principal function to supervise and control corporations for the encouragement and protection of the investments in said entities.

However, PSEs management prerogatives are not under the absolute control of the SEC. The PSE is, after all, a corporation authorized by its corporate franchise to engage in its proposed and duly approved business. One of the PSEs main concerns, as such, is still the generation of profit for its stockholders. Moreover, the PSE has all the rights pertaining to corporations, including the right to sue and be sued, to hold property in its own name, to enter (or not to enter) into contracts with third persons, and to perform all other legal acts within its allocated express or implied powers.

A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and perquisites appropriate to such body.[11] As to its corporate and management decisions, therefore, the state will generally not interfere with the same. Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.[12]Thus, the SEC may exercise its power only if PSEs judgment is attended by bad faith. In this case, certain circumstances gave rise to serious doubts as to the integrity of PALI as a stock issuer. PSE is justified in denying PALIs application. 4) TAN BOON BEE vs. JARENCIO (( CFI judge)

Paras (1988)

FACTS:

Petitoner, doing business under the name Anchor Supply Co. (Anchor), sold on credit to Graphic Publishing Inc. (Graphic) paper products amounting to P 55, 214.00. Graphic failed to pay the entire amount within the period agreed upon. Anchor filed a civil case for a sum of money which was decided favorably for them. A writ of execution was then issued by Judge Jarencio. However, the sheriff failed to find any property owned by Graphic. An alias writ of execution was subsequently issued and the sheriff levied upon one printing machine. Before the auction sale could take place, the Philippine American Drug Company (PADCO) informed the sheriff that the said machine is its property and not that of Graphics. PADCO asked that they cease and desist from carrying on the sale. The sheriff, however, proceeded with the sale and Anchor won, being the highest bidder. PADCO filed a Motion to Nullify Sale on Execution. Anchor argued that the levy should be upheld since the controlling stockholders of PADCO are the same controlling stockholders of Graphic. Jarencio ruled in favor of PADCO.

ISSUE:

1. WON Jarencio was right in not piercing PADCOs corporate identity?

RULING:

1. NO. It is true that a corporation, upon coming into being, is invested by law with a personality separate and distinct from that of the persons composing it as well as from any other legal entity to which it may be related However, this separate and distinct personality is merely a fiction created by law for convenience and to promote justice. This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve equity or when necessary for the protection of creditors. Corporations are composed of natural persons and the legal fiction of a separate corporate personality is not a shield for the commission of injustice and inequity. Likewise, this is true when the corporation is merely an adjunct, business conduit or alter ego of another corporation. In such case, the fiction of separate and distinct corporation entities should be disregarded.

In the case at bar, evidence showed that PADCO was not engaged in the printing business. Graphic and PADCO also shared the same board of directors. PADCO also holds 50% share of stock of Graphic. Further, the said machine had been in the premises of Graphic way before PADCO acquired its title. Yet, it was also shown that PADCO leased the machine to Graphic even before the former was able to purchase it from Capital Publishing. This only proves that PADCOs claim of ownership over the printing machine is not only farce and sham but also unbelievable.

PADCOs veil of corporate identity should have been pierced. B. ADVANTAGES AND DISADVANTAGES

C. DISTINGUISHED FROM OTHER ENTITITES

D. NATURE AND ATTRIBUTES5) Smith, Bell & Co. (Ltd) v Natividad, Collector of Customs of the port of CebuMalcolm; September 17, 1919

Facts

Smith, Bell & Co is a corporation organized under Philippine laws. The majority of its stockholders are British. It is the owner of a motor vessel known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons gross. The corporation applied to the Collector of Customs of the port of Cebu for a certificate of Philippine registry. The Collector refused to issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the Philippine Islands.

The particular legislation in issue here is Act No. 2761 which states that Upon registration of a vessel of domestic ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be issued for it. The law defines "Domestic ownership," as ownership vested in some one or more of the following classes of persons: (a) Citizens or native inhabitants of the Philippine Islands; (b) citizens of the United States residing in the Philippine Islands; (c) any corporation or company composed wholly of citizens of the Philippine Islands or of the United States or of both, created under the laws of the United States, or of any State thereof, or of thereof, or the managing agent or master of the vessel resides in the Philippine Islands.

The contention of the counsel for Smith Bell & Co. is that Act No. 2761 denies to the corporation the equal protection of the laws because it, in effect, prohibits the corporation from owning vessels, and because classification of corporations based on the citizenship of one or more of their stockholders is capricious, and that Act No. 2761 deprives the corporation of its properly without due process of law because by the passage of the law company was automatically deprived of every beneficial attribute of ownership in the Bato.

A writ of mandamus is prayed for by Smith Bell to compel the Collector of Customs to issue a certificate of Registry.Issue

WON the Government of the Philippine Islands, through its Legislature, can deny the registry of vessel in its coastwise trade to corporations having alien stockholders .Ratio/Ruling

Yes. The SC said that the guaranties of the Fourteenth Amendment and of the first paragraph of the Philippine Bill of Rights, are universal in their application to all person within the territorial jurisdiction, without regard to any differences of race, color, or nationality. The word "person" includes aliens. Private corporations, likewise, are "persons" within the scope of the guaranties in so far as their property is concerned. The Court said that to justify that portion of Act no. 2761 which permits corporations or companies to obtain a certificate of Philippine registry only on condition that they be composed wholly of citizens of the Philippine Islands or of the United States or both, as not infringing Philippine Organic Law, it must be done under one of the exceptions mentioned in the decision (such that it does not fall under the protection of the Bill of Rights or the Jones Law). The court also said that our local experience and customs must be taken into consideration.

The SC held that while Smith, Bell & Co. Ltd., a corporation having alien stockholders, is entitled to the protection afforded by the due-process of law and equal protection of the laws clause of the Philippine Bill of Rights, Act No. 2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd., the right to register vessels in the Philippines coastwise trade, falls within authorized exceptions, notably, within the purview of the police power, and so does not offend against the constitutional provision.

In essence, the court stated the exception (police power) is based on the purpose of the legislation which is to protect Philippine waters from aliens who may abuse Philippine hospitality since being an archipelago, the country is engaged in coastwide trade which is important to our trade and commerce.

The petition for a writ of mandamus is denied.6)Bache Rach v Ruiz

Villamor; February 27, 1971

Facts

The Commissioner of Internal revenue wrote a letter addressed to respondent Judge Ruiz requesting the issuance of a search warrant against petitioners for violation of Art 46(a) of NIRC and authorizing Revenue Examiner de Leon to make and file for an application for a search warrant.

De leon and his witness, Logronio, went to the CFI. At that time respondent Judge was hearing a certain case; so, by means of a note, he instructed his Deputy Clerk of Court to take the depositions of de Leon and Logronio. After the session had adjourned, respondent Judge was informed that the depositions had already been taken. The stenographer, upon request of respondent Judge, read to him her stenographic notes; and thereafter, respondent Judge asked respondent Logronio to take the oath and warned him that if his deposition was found to be false and without legal basis, he could be charged for perjury. Respondent Judge signed respondent de Leons application for search warrant and respondent Logronios deposition. The search warrant was then signed by respondent Judge and accordingly issued.The BIR agents served the search warrant to the petitioners at the offices of petitioner corporation. Petitioners lawyers protested the search on the ground that no formal complaint or transcript of testimony was attached to the warrant. The agents nevertheless proceeded with their search which yielded six boxes of documents. Petitioners filed a petition with the CFI of Rizal praying that the search warrant be quashed, dissolved or recalled, that preliminary prohibitory and mandatory writs of injunction be issued, that the search warrant be declared null and void.

It is contended by respondents that a corporation is not entitled to protection against unreasonable searches and seizures

Issue

WON a corporation is entitled to protection against unreasonable searches and seizures.

Ruling/Ratio: YES

The Court cited jurisprudence holding that a corporation is entitled to immunity against unreasonable searches and seizures. A corporation is, after all, but an association of individuals under an assumed name and with a distinct legal entity. In organizing itself as a collective body it waives no constitutional immunities appropriate to such body. Its property cannot be taken without compensation. It can only be proceeded against by due process of law, and is protected, under the 14th Amendment, against unlawful discrimination . . . (Hale v. Henkel)

In the case of Stonehill v Diokno the court impliedly recognized the right of a corporation to object against unreasonable searches and seizures. The court stated that it is well settled that the legality of a seizure can be contested only by the party whose rights have been impaired thereby, and that the objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties.

In the Stonehill case only the officers of the various corporations in whose offices documents, papers and effects were searched and seized were the petitioners. In the case at bar, the corporation to whom the seized documents belong, and whose rights have thereby been impaired, is itself a petitioner. On that score, petitioner corporation here stands on a different footing from the corporations in Stonehill.

Petitioner corporation is protected against the unreasonable search and seizure.7) HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J. BROOKS and KARL BECK, petitioners, vs. HON. JOSE W. DIOKNO, in his capacity as SECRETARY OF JUSTICE; JOSE LUKBAN, in his capacity as Acting Director, National Bureau of Investigation; SPECIAL PROSECUTORS PEDRO D. CENZON, EFREN I. PLANA and MANUEL VILLAREAL, JR. and ASST. FISCAL MANASES G. REYES; JUDGE AMADO ROAN, Municipal Court of Manila; JUDGE ROMAN CANSINO, Municipal Court of Manila; JUDGE HERMOGENES CALUAG, Court of First Instance of Rizal-Quezon City Branch, and JUDGE DAMIAN JIMENEZ, Municipal Court of Quezon City, respondents.

(Concepcion, 1967)

FACTS

The Respondent judges issued a total of 42 search warrants against the petitioners and/or the corporations in which they were officers, on suspicion of violating Central Bank Laws, Tariff and Customs Laws, Internal Revenue Code, and the RPC. The warrants directed peace officers to seize personal propertyincluding documents...showing all business transactions....used or intended to be used as the means of committing the offense.

Petitioners, who had deportation cases filed against them, filed before the Supreme Court a petition for certiorari, prohibition, mandamus and injunction, and prayed for a writ of preliminary injunction. They argued that the search warrants were unconstitutional on several grounds (warrants did not particularly describe documents seized, illegal search and seizure, warrants merely fishing expedition, etc).

The SC issued the writ of prelim injunction prayed for. However, it was only partially lifted, insofar as the papers, documents, and things seized from the offices of the corporations are concerned; but, the injunction was maintained as regards those seized in the residences of petitioners herein.

Thus, the documents, papers, and things seized under the alleged authority of the warrants in question may be split into two (2) major groups, namely: (a) those found and seized in the offices of the aforementioned corporations, and (b) those found and seized in the residences of petitioners herein.

ISSUES

1) WON the petitioners (corporation officers) can question the legality of warrants issued in the first group and the seizures made in pursuance of such warrants: NO.

2) WON the search warrants and subsequent searches and seizure were valid: NO. [constitutional issue]

RULING/RATIO:

1.) NO. The petitioners cannot question the legality of the warrants and seizures made in the offices of the corporation because they do not have the proper personality. The legality of a seizure can only be contested by a party whose rights have been impaired, AND corporations have their respective personalities, separate and distinct from the personalities of the petitioners. So despite amount of shares or interest in corporations, the petitioners cannot object as to the use of the documents seized in the corporation offices.

2) NO. The warrants and seizures were unconstitutional, because the Constitution requires two elements: that there be probable cause, and that the warrant particularly describe the thing seized. The warrants in the case at bar failed to satisfy the constitutional requirements. First, it failed to specify an offense, which is contrary to the constitutional purpose to wipe out general warrants. Second, The warrants authorized the search for and seizure of records pertaining to all business transactions of petitioners, regardless of whether the transactions were legal or illegal.

8) BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, CHAIRMAN JOVITO SALONGA, COMMISSIONER MARY CONCEPCION BAUTISTA, COMMISSIONER RAMON DIAZ, COMMISSIONER RAUL R. DAZA, COMMISSIONER QUINTIN S. DOROMAL, CAPT. JORGE B. SIACUNCO, et al., respondents.

(Narvasa, 1987)

[sorry. Medyo mahaba to. I apologize if I miss anything relevant Dana]

FACTS

BASECO describes itself in its petition as "a shiprepair and shipbuilding company * * incorporated as a domestic private corporation. Its Articles of Incorporation disclose that its authorized capital stock is P60,000,000.00 divided into 60,000 shares, of which 12,000 shares with a value of P12,000,000.00 have been subscribed, and on said subscription, the aggregate sum of P3,035,000.00 has been paid by the incorporators. The same articles identify the incorporators, numbering fifteen (15). By 1986, however, of these fifteen (15) incorporators, six (6) had ceased to be stockholders. As of 1986, there were twenty (20) stockholders listed in BASECO's Stock and Transfer Book.

A sequestration order was issued directing PCGG commissioners to sequester several companies, BASECO included, authorizing its agents to request support from military/police authorities for any acts necessary to the sequestration order. The PCGG later ordered BASECO to produce certain documents (i.e. stock transfer book, articles of incorporation and other legal documents, list of stockholders, financial statements, etc.), threatening to cite the company for contempt in pursuance with EOs 1 and 2 if they failed to submit within 5 days.

BASECO filed a special civil action of certiorari and prohibition challenging the constitutionality of the Executive Orders and PCGG's sequestration and other orders. BASECO claimed that 1) there was no notice and hearing before the sequestration; 2) PCGG is not a court and therefore not competent to act as prosecutor and judge; 3) the issuances do not provide for any remedy by which petitioner may expeditiously challenge the validity of the takeover after the same has been effected; and 4) since they are directed against specified persons, and in disregard of the constitutional presumption of innocence and general rules and procedures, they constitute a Bill of Attainder.

The company also contended that the production order violated its right against self-incrimination and unreasonable search and seizure.

ISSUES

1) WON BASECO, a corporation, can avail of the right to self-incrimination, and if the documents are self-incriminating: NO

2) WON EO 1, 2, and 14 (which empowers PCGG to file suits) are constitutional: YES

3) WON PCGG interfered with BASECO's business affairs and its right of dominion: NO

RULING/RATIO:

1.) NO. The right to self-incrimination does not apply to juridical persons, including corporations. In Wilson v. United States, the court held:

The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. Its power are limited by law. It can make no contract not authorized by its charter. Its right to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserve right in the legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose...

Every corporation is a direct creature of the law and receives an individual franchise from the State. But a partnership, although is deemed to be a juridical person by grant of the State, becomes a juridical person through a private contract of partnership between and among the partners, without needing to register its existence with the State or any of its organs. More importantly, the partnership person is a fiction of law given more for the convenience of the partners, and thus can be dissolved by the will of the partners or by the happening of an event that would constitute the termination of the contractual relationship, whereas, no corporation can be dissolved without the consent of the State, and only after due notice and hearing. Likewise, the other features of the partnership, mainly mutual agency, delectus personae and unlimited liability on the part of the partners, that places a close identity between the persons of the partners and that of the partnership. This is unlike in corporate setting, where the stockholders do not own corporate properties, have no participation in management of corporate affairs, and enjoy personal immunity from the debts and liabilities of the corporation, and where basically the corporation is its own person, and acts through a professional group of managers and agents called the Board of Directors.

While therefore it is understandable that a corporation, that has no heart, feels pain, and has no soul that can be damned, cannot be expected to be entitled to the constitutional right against self-incrimination, it is quite different in the case of the partnership, since its person is merely an extension of the group of partners, who having come together in business, and acting still for such business enterprise, could not be presumed to have waived their individual rights against self-incrimination.

2) YES. The impugned executive orders are avowedly meant to carry out the explicit command of the Provisional Constitution, ordained by Proclamation No. 3, 23 that the President-in the exercise of legislative power which she was authorized to continue to wield "(until a legislature is elected and convened under a new Constitution" "shall give priority to measures to achieve the mandate of the people," among others to (r)ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interest of the people through orders of sequestration or freezing of assets or accounts."

3) NO. The PCGG did not interfere with BASECO's right of dominion by sequestration and other acts, as the act does not make PCGG the owner of the company thereof. PCGG only has powers of administration.

The Court discussed how the acts taken by PCGG were proper, as they had significant evidence that Marcos was using BASECO, when he was president, to take over other companies.

9) PHILIPPINE NATIONAL BANK v. COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.

ANTONIO, J., 1978

FACTS

PNB executed its Bond of P2000 (originally P4000) with Tapnio as principal, in favor of PNB Branch at Pampanga (Bank), to guarantee the payment of her account with the said Bank. As a security for the Bond, Tapnio and Philamgen executed an indemnity agreement, with the following terms: the rate of the interest shall be 12% per annum of the amount that PNB would pay the Bank, plus 15% of the whole amount due in case of litigation, as attorneys fees.

Tapnio owed the bank P2000 plus accumulated interest unpaid, which she failed to pay the Bank despite its demands. The Bank then wrote a letter of demand to PNB; PNB paid the Bank a total of P2379.91, and then made several demands (both oral and written) to Tapnio, but to no avail.

Tapnio admitted all the foregoing facts. She claims, however, that when demands were made by PNB, she told the latter that she no longer considered herself to be indebted to the Bank because she, along with Mr. Jacobo Tuazon, had made an arrangement that he would lease her 1000 piculs of unused export sugar quota. Since said quota was mortgaged with PNB, the contract of lease was sent to the Pampanga Branch Manager, who set the price at P2.80/picul, with the approval of the PNB VP Buenaventura. However, the Board of Directors wanted the price to be raised to P3.00/picul, causing Tuazon to refuse the deal and negotiations to fail to the prejudice of Tapnio. She was, as a result, unable to realize the amount of P2,800, which would have sufficiently covered her indebtedness.

There is no question that Tapnios failure to utilize her sugar quota was due to the disapproval of the lease by the Board of Directors.

ISSUES:

1) WON there can be corporate liability for torts

2) WON PNB is liable for the damage caused

RULING/RATIO:

1) YES. A corporation is civilly liable in the same manner as natural persons for torts, because generally speaking, the rules governing the liability of a principal or master for a tort committed by an agent or servant is the same whether the principal or master be a natural person or a corporation, and whether the servant or agent be a natural person. A corporation is liable, therefore, whenever a tortuous act is committed by an officer or agent under express direction or authority from the stockholders or members acting as a body, or, generally, from the directors as the governing body.

2) YES. The court found that there was no reasonable basis for the Board to reject the price of P2.80. The fact that there were isolated instances of transactions where piculs were sold at P3.0 each does not necessarily mean that there are always ready takers of said price. It wouldve made a measly P200 difference, which neither Tapnio nor PNB needed Tapnio had securities in all of her accounts and she apparently had the means to pay her obligation to the Bank, as shown by the fact that she has been granted several sugar crop loans of the total value of P80,000.00 for the agricultural years 1952-1956.

Although PNB had the ultimate authority to approve or disapprove the lease, it still had the responsibility of observing, for the protection of the interest of Tapnio et al., that degree of care, precaution and vigilance which the circumstances justly demand in approving/disapproving the lease of said sugar quota. The court cited articles 19 and 21 of the Civil Code.

10) ALFREDO CHING v. THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS-VILLAVERT, JUDGE EDGARDO SUDIAM of the Regional Trial Court, Manila, Branch 52; RIZAL COMMERCIAL BANKING CORP. and THE PEOPLE OF THE PHILIPPINES

CALLEJO, SR., J. 2006

FACTS

In Sept-Oct 1980, Philippine Blooming Mills Inc. (PBMI), applied with Rizal Commercial Banking Corp (RCBC) for the issuance of commercial letters of credit to finance its importation of goods. Ching, as its Senior VP, was the one who applied for such issuance and subsequently signed the documents as surety, acknowledging delivery of the goods. However, when the trust receipts matures, Ching failed to return the goods to RCBC, or to return their value (P6,940,280.66) despite demands. RCBC then filed an estafa complaint against him.

After preliminary investigation, the City Prosecutor (CP) found probable cause for estafa under the RPC, in relation to PD 115 (Trust Receipts Law); 13 Informations were filed, and Ching appealed to the Minister of Justice, but was denied. His Motion for Reconsideration, however, was granted, and the Minister ordered the CP to move for the withdrawal of the Information. The RTC also later granted motion to Quash the Informations on the ground that the material allegations did not amount to estafa.

In the meantime, the court rendered judgment in the case of Allied Banking v. Ordonez: the penal provision in PD 115 encompasses any act violative of a trust receipt; the non-payment of the amount covered by a trust receipt is an act violative of the obligation of an entrustee to pay. RCBC then re-filed the original complaint for estafa before the Office of the CP. After another preliminary investigation, the CP found no probable cause to charge him with violation of PD 115, as his liability was only civil, having signed the trust receipts as surety.

Upon appeal, the Justice Secretary found for RCBC: because Ching signed the trust receipts, he was the one responsible for the offense and thus, the execution of the receipts is enough to indict him as the official responsible for violation of PD 115. And, because he bound himself as a surety, aside from being a corporate official, he could be proceeded against in two ways: as a surety for civil liability, and as an official for criminal liability. PD 115 explicitly allows the prosecution of corporation officers without prejudice to the civil liabilities arising from criminal offenses.

Ching filed a Motion for Reconsideration, which was denied. In the CA, he filed for certiorari, prohibition, and mandamus, but the case was dismissed upon procedural and substantive grounds. Hence this case.

ISSUES:

1) WON there can be criminal liability for corporations

2) WON Ching is criminally liable

3) WON the Certificate of Non-Forum Shopping in the petition submitted to the CA was fatally defective

RULING/RATIO:

1) YES. The crime defined in PD 115 is malum prohibitum but classified as estafa; it may be committed by a corporation or other juridical entity or by natural persons.

Although the entrustee is a corporation, the law specifically makes officers, employees, or others responsible for the offense without prejudice to civil liability because they are given authority and responsibility to devise means necessary to ensure compliance with the law; if they fail to do so, theyre criminally accountable, having a responsible share in the violations of the law.

A corporation cant be arrested and imprisoned and hence cant be penalized for a crime punishable by imprisonment. However, it may be changed and prosecuted or a crime which imposes a fine as its penalty. Even if the statue prescribes both fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty, may be fined.

When a criminal statute designates an act of a corporation or a crime and prescribes punishment therefor, it creates a criminal offense which, otherwise, wouldnt exist and such can be committed only by the corporation. But when a penal statute doesnt expressly apply to corporations, it doesnt create an offense for which a corporation may be punished. If the State, by statute, defines a crime that may be committed by a corporation but prescribes the penalty to be suffered by the officers, directors, or employees of such corporation or other persons responsible for the offense, only such individuals will suffer such penalty.

2) YES. Corporate officers or employees, through whose act, default or omission the corporation commits a crime, are individually guilty of the crimes whether or not the crime requires consciousness of wrongdoing. It applies to those who, by virtue of their relation to the corporation, had the power to, but did not prevent the act. All parties active in a promoting a crime, whether or not agents, are principals, and whether or not they benefited is immaterial in determining criminal liability. Benefit is not an operative fact. Quoting former Chief Justice Earl Warren, a corporate officer cannot protect himself behind a corporation where he is the actual, present and efficient actor.

Since a corporation cant be proceeded against criminally, because it cant commit crime requiring personal violence or malicious intent, criminal action is limited to the corporation agents guilty of the act amounting to a crime, and never against the corporation itself. Chings act of signing the trust receipts is enough to indict him as the official responsible for violation of PD 115.

Ching cant say that it wasnt a trust receipt transaction (thus rendering PD 115 inapplicable) because, citing Colinares v. CA, there are two possible situations in a trust receipt transaction: entregarla, referring to money received under the obligation to deliver it to the owner of merchandise sold, and devolvera, referring to merchandise received under the obligation to give back to the owner. Thus, the failure of the entrustee to turn over the proceeds of the sale of the goods or to return such to the owner is a crime under PD 115, without need of proving intent to defraud.

3) YES. The certification failed to state that Ching had not heretofore commenced any other action involving the same issue in the Supreme Court, the Court of Appeals or the different divisions thereof or any other tribunal or agency as required by par.4, Sec. 3, Rule 46 of the ROC. Compliance with the certificate of non-forum shopping is separate from and independent of the avoidance of forum shopping itself. The requirement is mandatory, and failure to comply shall be sufficient ground for the dismissal of the petition without prejudice, unless otherwise provided.

11)PRIME WHITE CEMENT CORPORATION vs IAC

(Campos, Jr., J., 1993)

FACTS

Alejandro Te and Prime White Cement Corporation, thru its President, Zosimo Falcon and Chairman of the Board, Justo Trazo, entered into a dealership agreement with the following terms: (a) Te would act as the exclusive dealer/distributor of cement products in entire Mindanao area; (b) Prime White would sell and supply to Te 20,000 bags of cement per month with a cost of P9.70 per bag; and (c) every time Prime White is ready to deliver the cement, a letter of credit in favor of the corporation shall be opened with any bank upon certification on the bill of lading that the goods have been loaded.

After the agreement has been concluded, Te advertised and told all his friends that he won the dealership deal. Relying on the dealership agreement, he then entered into written agreements with several hardware stores in Davao and CDO. However, upon request that the corporation to comply with the agreement, the corporation decided to impose conditions that were not in the original terms of agreement. (i.e. only 8,000 bags per month will be delivered; price = P13.30 per bag; letter of credit to be opened only with Prudential Bank in Makati, etc,). Te demanded that Prime White comply with the dealership agreement, but the corporation refused.

Trial Court found Prime White liable to Te for actual and moral damages and attorneys fees. CA affirmed and held that it appears on the face of the contract that both officers were duly authorized to enter into the agreement on behalf of the corporation, and such agreement was thus valid. When they entered into the transaction, they created the impression that they were duly clothed with authority to do so, and cannot now dispute said agreement. (principle of estoppel) ISSUE: WON dealership agreement referred by the President and Chairman of the Board is a valid and enforceable contract NORATIO:

The rule that an agreement entered into by the President and Chairman of the Board would be valid and enforceable only applies if the transaction is with a person other than a director or officer of a corporation. Alejandro Te was a Director and Auditor of Prime White Corporation, and thus occupies a position of trust and owes a duty of loyalty to the corporation. In case of conflicts of interest, he cannot sacrifice the interests of the corporation to this own advantage. This trust relationship springs from the fact that directors have control and guidance of corporate affairs and property interests of stockholders. He cannot use this power for his personal advantage and to the detriment of other stockholders.

However , not all contracts with a director is void or voidable. If the contract is fair and reasonable, it may be ratified by stockholders provided there is full disclosure of his adverse interest. (See Art. 32, Corpo Code).

In this case, there is reason to believe the agreement was not fair nor reasonable. In the contract, the cement was to be sold at a fixed price for 5 years, without considering the fact that prices may rise due to inflation. There was no provision allowing for increase in price mutually acceptable to parties. On the contrary, in his subsequent contracts with third parties, he protected himself from any increase in market price of white cement only for two years. It is clear that Te was guilty of disloyalty to the corporation and was attempting to enrich himself at its expense. There is no showing that the stockholders ratified the dealership agreement.

SET ASIDE

12) FILIPINAS BROADCAST NETWORK vs. AGO MEDICAL AND EDUCATIONAL CENTER

(Carpio, J., 2005)

FACTS

Rima and Alegre hosted a radio show named Expose, which was aired every morning by DZRC-AM, and owned by Filipinas Broadcast Network Inc. (FBNI) On this show, they exposed various alleged complaints against Ago Medical and Educational Center (AMEC), which prompted AMEC and their Dean Angelita Ago to file complaints for damages against Rima, Alegre, and FBNI.

The following are the alleged libelous statements:

1. If you have children taking medical course at AMEC-BCCM, advise them to pass all subjects because if they fail in any subject they will repeat their year level, taking up all subjects including those they have passed already2. Earlier AMEC students in Physical Therapy had complained that the course is not recognized by DECS.3. Students are required to take and pay for the subject even if the subject does not have an instructor - such greed for money on the part of AMECs administration.4. The administrators of AMEC-BCCM, AMEC Science High School and the AMEC-Institute of Mass Communication in their effort to minimize expenses in terms of salary are absorbing or continues to accept rejects. AMEC is a dumping ground, garbage, not merely of moral and physical misfits.The RTC found FBNI and Alegre liable for libel but absolved Rima, finding his statements within the bounds of free speech. The CA, however, found both broadcasters guilty of libel for failing to overcome the presumption of malice. It also held that FBNI failed to exercise due diligence in its supervision and selection of their employees, hence, solidarily liable with the broadcasters.

ISSUES:

1. WON broadcasts are libelous - YES

2. WON AMEC is entitled to moral damages (topical) - YES

3. WON award of attorneys fees is proper - NO

4. WON FBNI is solidarily liable with Rima and Alegre - YES

RULING:

1. YES, broadcasts were found to be libelous since they were not based on established facts and it was not found that the broadcasters took pains to verify sources of their information. Every defamatory imputation is presumed malicious and Rima and Alegre failed to show their good intentions for airing the said statements. The doctrine of fair comment, introduced in the case of Borjal vs CA, does not find application in this case because the questioned broadcasts are not based on established facts. Moreover, the broadcasts failed to meet the ethical standards set forth by the Radio Code.

2. YES. The general rule is that juridical persons are not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, anxiety, or mental anguish. However, Art. 2219(7) expressly provides that moral damages may be recovered in cases of libel, slander or other forms of defamation. Said provision does not distinguish between natural or juridical persons. Moreover, where the broadcast is libelous per se, the law implies damages. Moral damages may be awarded but must be reduced because it was not shown that AMEC suffered any material loss or damage to its reputation.

3. NO. AMEC did not adduce evidence to warrant the award of attorneys fees.

4. YES. The contention of FBNI that it is not solidarily liable with the broadcasters because it exercised due diligence in the supervision and selection of employees is untenable. Firstly, the basis of the action is a tort and joint tortfeasors are soldiarily liable for the tort they commit. Rima and Alegre were clearly performing their official duties as hosts of FBNIs radio program when they aired the broadcasts. It was not alleged nor proved that Rima and Alegre went beyond the scope of their work at that time. There was also no showing that FBNI did not authorize such statements. Secondly, contrary to their claim, there was also no evidence that the broadcasters have undergone a regimented process (interviews, examinations, apprenticeship) of application. Rima and Alegre also had deficiencies in their KBP accredition. Hence, there was clearly a lack of diligence in selection and supervision of its employees.

E. KINDS OF CORPORATIONS

1. Vis--vis State: Public, quasi-public, private

13) BOY SCOUTS OF THE PHILIPPINES, Petitioner, VS COMMISSION ON AUDIT, Respondent.

(LEONARDO-DE CASTRO,J.. June 7, 2011)FACTS

The Respondent, Commission on Audit or COA, issueda resolution stating that: 1. the BSP was created as a public corporation; 2. the Supreme Court ruled that the BSP, as constituted under its charter, was a GOCC; and, 3. that the BSP is appropriately regarded as a government instrumentality under the 1987 Administrative Code. It stated that pursuant to its constitutional mandate, it shall conduct an annual financial audit of the Boy Scouts of the Philippines in accordance with generally accepted auditing standards.

The Petitioner, Boy Scouts of the Philippines or BSP, sought reconsideration of the COA Resolution. BSP claims that it is not subject to auditing by the COA. The BSP contends that it is not a government-owned or controlled corporation; neither is it an instrumentality, agency, or subdivision of the government. The BSP maintained that its statutory designation as a public corporation and the public character of its purpose and functions are not determinative of the COAs audit jurisdiction; it also said that the funds and property that it either owned or held in trust are not public funds and are not subject to the COAs audit jurisdiction.

The COA contends that the BSP is a public corporation and the manner of its creation and the purpose for which the BSP was created indubitably prove that it is a government agency and as such is subject to audit by the COA. The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service Commission even before the 1987 Constitution was the fact that it was an attached agency to the Dep Ed. The COA points out that the government is not precluded by law from extending financial support to the BSP and adding to its funds.

COA said that Republic Act No. 7278 did not supersede the Courts ruling inBoy Scouts of the Philippines v. National Labor Relations Commission. It informed the BSP that a preliminary survey of its organizational structure, operations and accounting system/records shall be conducted. Upon the BSPs request, the audit was deferred for thirty (30) days.

BSP then filed a Petition for Review with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA.This wasdeniedand held that the BSP is under its audit jurisdiction.Motion for Reconsideration was also denied. This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary restraining order against the COA.

ISSUES

1) WON the BSP falls under the COAs audit jurisdiction? YES.

RULING/RATIO:

YES. The BSP is a public corporation and its funds are subject to the COAs audit jurisdiction.

The BSP is considered a Public Corporation under Paragraph 2, Art 2 of the Civil Code. There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under Republic Act No. 7278,falls under the second classification.Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2)Other corporations,institutions and entities for public interest or purpose created by law; their personality begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations forprivate interest or purposeto which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member. (Emphases supplied.)

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under Article 45 of the Civil Code, which provides:

Art. 45.Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or recognizing them.Private corporations are regulated by laws of general application on the subject. Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning partnerships.

The BSP is classified as a public entity. The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl Scouts of the Philippines, it is classified as anattached agencyof the DECS under Executive Order No. 292, or theAdministrative Code of 1987. Meaning to say, it may be a recipient of funds from its mother agency which is the DECS or now Dep Ed.

The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter.Not all corporations, which arenotgovernment owned or controlled, areipso factoto be considered private corporations as there exists another distinct class of corporations or chartered institutions which are otherwise known as public corporations.These corporations are treated by law as agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but to different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any of its Departments or Offices.

Historically, therefore, the BSP had been subjected to government audit in so far as public funds had been infused thereto.However, this practice should not preclude the exercise of the audit jurisdiction of COA, clearly set forth under the Constitution, which pertinently provides:

Section 2. (1)The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, theGovernment, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations with original charters, ...and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations with original charters and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law of the granting institution to submit to such audit as a condition of subsidy or equity.

Since the BSP, under its amended charter, continues to be a public corporation or a government instrumentality, we come to the inevitable conclusion that it is subject to the exercise by the COA of its audit jurisdiction in the manner consistent with the provisions of the BSP Charter.

The instant petition for prohibition isDISMISSED.14) MARILAO WATER CONSUMERS ASSOCIATION, INC.,petitioners,vs.INTERMEDIATE APPELLATE COURT, MUNICIPALITY OF MARILAO, BULACAN, SANGGUNIANG BAYAN, MARILAO, BULACAN, and MARILAO WATER DISTRICT,respondents.NARVASA, CJ. September 9, 1991

FACTS

Presidential Decree 198 authorized the creation of water districts all over the country to protect the water facilities providing such service throughout the country. The decree specifies that juridical entities thus created and organized under PD 198 are considered quasi-public corporations, performing public services and supplying public wants. They are authorized not only to "exercise all the powers which are expressly granted" by said decree, and those "which are necessarily implied from or incidental to" said powers, but also "the power of eminent domain subject to review by the Administration" (LWUA). The decree also established a government corporation attached to the Office of the President, known as the Local Water Utilities Administration (LWUA). Based on such decree, the Marilao Water District was formed by Resolution of the Sangguniang Bayan of the Municipality of Marilao.

The petitioners, Marilao Water Consumers Association, Inc., claim that the creation of the Marilao Water District was defective and illegal and such petition was filed with the Regional Trial Court at Malolos, Bulacan. Impleaded as respondents were the Marilao Water District, as well as the Municipality of Marilao, Bulacan; its Sangguniang Bayan; and Mayor Nicanor V. GUILLERMO.

The petition claimed that 1) there had been no real, but only a "farcical" public hearing prior to the creation of the Water District; 2) not only was the waterworks system turned over to the Water District without compensation. but a subsidy was illegally authorized for it; 3) the Water District was being run with "negligence, apathy, indifference and mismanagement," 4) the consumers were consequently "forced to organize themselves into a corporation lto demand adequate service. The respondents, Marilao Water District, filed its Answer denying the material allegations of the petition and asserting as affirmative defenses (a) the Court's lack of jurisdiction of the subject matter, and (b) the failure of the petition to state a cause of action. The answer alleged that the matter of the water district's dissolution fell under the original and exclusive jurisdiction of the Securities & Exchange Commission (SEC); and the matter of the propriety of water rates, within the primary administrative jurisdiction of the LWUA and the quasi-judicial jurisdiction of the National Water Resources Council. On the same date, Marilao Water District filed a motion for admission of its third-party complaint against the officers and directors of the petitioner corporation, it being claimed that they had instigated the filing of the petition simply because one of them was a political adversary of the respondent Mayor.

The Trial Court ruled in favor of the respondents. It dismissed the Consumers Association's suit. Its motion for reconsideration denied.

The Consumers Association filed petition for review oncertiorari, The case was however referred to the Intermediate Appellate Court. The IAC dismissed the petition on procedural grounds, saying that it was the wrong remedy. The motion for reconsideration was also denied. It claimed that the controversy falls within the province of the SEC. The petitioners then went to the Supreme Court and filed the petition for review.

ISSUE:

1) WON the Securities and Exchange Commission or SEC has jurisdiction over the dissolution of the water district organized and operating as a quasi public corporation under PD 198? NO.

RULING/RATIO:

NO. The SEC has no jurisdiction to decide on the dissolution of the water district as such is a quasi public corporation and not one organized under the corporation code. The juridical entities known as water districts created by PD 198, although considered as quasi-public corporations and authorized to exercise the powers, rights and privileges given to private corporations under existing lawsare entirely distinct from corporations organized under the Corporation Code, PD 902-A, as amended.

The Corporation Code does not have anything to do with the formation and organization of water districts. PD 198 provides for such mode of formation. The resolutions creating them are not filed or registered with the SEC but are instead filed with the LWUA. This entity has its own charter and not articles of incorporation drawn up under the Corporation Code, which set forth the name of the water districts, the number of their directors, the manner of their selection and replacement, their powers, etc.

The SEC which is charged with enforcement of the Corporation Code as regards corporations, partnerships and associations formed or operating under its provisions, has no power of supervision or control over the activities of water districts. More particularly, the SEC has no power of oversight.That function of supervision or control over water districts is entrusted to the Local Water Utilities Administration.SEC has no expertise whatsoever to do so. The "Provincial Water Utilities Act of 1973" has a specific provision governing dissolution of water districts created thereunder This is Section 45 of PD 198reading as follows:

SEC. 45.Dissolution. A district may be dissolved by resolution of its board of directors filed in the manner of filing the resolution forming the district: Provided, however, That prior to the adoption of any such resolution: (1) another public entity has acquired the assets of the district and has assumed all obligations and liabilities attached thereto; (2) all bondholders and other creditors have been notified and they consent to said transfer and dissolution; and (3) a court of competent jurisdiction has found that said transfer and dissolution are in the best interest of the public.

Under this provision, it is the LWUA which is the administrative body involved in the voluntary dissolution of a water district; it is with it that the resolution of dissolution is filed, not the Securities and Exchange Commission.

The SEC has no jurisdiction over the water districts. For although described as quasipublic corporations, and granted the same powers as private corporations, water districts are not really corporations. They have no incorporators, stockholders or members, who have the right to vote for directors, or amend the articles of incorporation or by-laws, or pass resolutions, or otherwise perform such other acts as are authorized to stockholders or members of corporations by the Corporation Code. There can therefore be no such thing in a water district as "intra-corporate or partnership relations, between and among stockholders, members or associates (or) between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively," within the contemplation of Section 5 of the Corporation Code so as to bring controversies involving them within the competence and cognizance of the SEC.

1. There can be even less debate about the fact that the SEC has no jurisdiction over the co-respondents of the Marilao Water District the Municipality of Marilao, its Sangguniang Bayan and its Mayor who are accused of a "conspiracy" with the water district in respect of the anomalies described in the Consumer Associations' petition.2. The National Water Resources Council, on the other hand, is conferred "original jurisdiction over all disputes relating to appropriation, utilization, exploitation, development, control, conservation and protection of waters within the meaning and context of the provisions of ..." and its decision on water rights controversies may be appealed to the Court of First Instance of the province where the subject matter of the controversy is situated.The Consumer Association's action therefore is, in fine, in the nature of a mandamus suit, seeking to compel the board of directors of the Marilao Water District, and its alleged co-conspirators, the Sangguniang Bayan and the Mayor of Marilao to go through the process above described for the dissolution of the water district.

In summary, taking account of the nature of the proceedings for dissolution just described, it seems plain that the case does not fall within the limited jurisdiction of the SEC., but within the general jurisdiction of Regional Trial Courts.RTC had JURISDICTION, not SEC. CA REVERSED.

15) ENGR. RANULFO C. FELICIANO, in his capacity as General Manager of the Leyte Metropolitan Water District (LMWD), Tacloban City, petitioner, vs. COMMISSION ON AUDIT, Chairman CELSO D. GANGAN, Commissioners RAUL C. FLORES and EMMANUEL M. DALMAN, and Regional Director of COA Region VIII, respondents.

Carpio, J. (2004)Facts

A Special Audit Team from COA audited the accounts of Leyte Metropolitan Water District (LMWD) and thereafter requested payment of auditing fees.

Petitioner Feliciano, General Manager of LMWD, refused to pay citing PD 198COA denied the request as well as the motion for reconsideration

Issues:

1. Whether LMWS is subject to COAs audit jurisdiction.

2. Whether LWDs are Private or GOCCs with Original Charters. a. WON PD 198 is the special charter creating LWDs

b. WON the Sanggunian Bayan that created the LWDs and not PD 198.

c. WON one special law can serve as enabling law for several GOCCs

d. WON LWDs cannot be classified as public because PD 198 considers it as quasi-public

e. WON PD 198 classifies LWDs into private coporations because of the transfer of ownership from LGUs to water districts.RULING/RATIO

1. Whether LMWS is subject to COAs audit jurisdiction. YES

The Constitution and existing laws2. Whether LWDs are Private or GOCCs with Original Charters. GOCC with original charter

Only corporations created under a general law can qualify as private corporations, that general law is the Corporation Code,LWDs are not private corporations because they are not created under the Corporation Code. Furthermore, the following indicate that they are not private:

LWDs are not registered with the SEC

no articles of incorporation, no incorporators and no stockholders or members.

no stockholders or members to elect the board directors The local mayor or the provincial governor appoints the directors of LWDs for a fixed term of office.

a) WON PD 198 is the special charter creating LWDs

LWDs exist by virtue of PD 198, which constitutes their special charter. Since under the Constitution only government-owned or controlled corporations may have special charters, LWDs can validly exist only if they are government-owned or controlled. Without PD 198, LWDs would have no corporate powers. To claim that LWDs are private corporations with a special charter is to admit that their existence is constitutionally infirm.

b) WON it is the Sanggunian Bayan that created the LWDs and not PD 198. NO

The Local Government Codec) WON one special law can serve as enabling law for several GOCCs YES

The Constitution (sec 16 Art XII) permits by using the word may Congress to create a GOCC with a special charter. There is, however, no prohibition on Congress to create several GOCCs of the same class under one special enabling charter.

The rationale behind the prohibition on private corporations having special charters does not apply to GOCCs. There is no danger of creating special privileges to certain individuals, families or groups if there is one special law creating each GOCC.

d) WON LWDs cannot be classified as public because PD 198 considers it as quasi-public NO

The exercise of COAs audit jurisdiction depends on the governments ownership or control of a corporation. The nature of the corporation, whether it is private, quasi-public, or public is immaterial.

The government controls LWDs because under PD 198 the municipal or city mayor, or the provincial governor, appoints all the board directors of an LWD for a fixed term of six years.e) WON PD 198 classifies LWDs into private coporations because of the transfer of ownership from LGUs to water districts

The transfer of assets mandated by PD 198 is a transfer of the water systems facilities under the control of such city, municipality or province to the water district.Other issuesWON Section 20 of PD 198 prevents COA from auditing LWDsPD 198 cannot prevail over the Constitution. The second sentence of Section 20 of PD 198 is unconstitutional since it violates Sections 2(1) and 3, Article IX-D of the Constitution.

WON the practice of charging auditing fees is illegal under RA 7658

Section 18 of RA 6758,COA may charge GOCCs actual audit cost but GOCCs must pay the same directly to COA and not to COA auditors. Petitioner has not alleged that COA charges LWDs auditing fees in excess of COAs actual audit cost. Neither has petitioner alleged that the auditing fees are paid by LWDs directly to individual COA auditors. 16) SHIPSIDE INCORPORATED, petitioner, vs. THE HON. COURT OF APPEALS [Special Former Twelfth Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San Fernando City, La Union) & The REPUBLIC OF THE PHILIPPINES, respondents.

MELO, J.: (2001)

Facts:

Rafael Galvez owned 4 lots, all covered in a ceritifcate of title issued in his name. 2 of the lots (1 and 4) were sold to Mamaril et al. who then sold the said lots to Lepanto Consolidated Mining Company.Lepanto thereafter sold the same to Petitioner Shipside.

Prior to the sale in favor of Shipside and unknown to Lepanto, the CFI of La Union in a Land Registration Case declared the title in the name of Rafael Galvez of the Registry of Deeds for the Province of La Union null and void, and ordered the cancellation thereof.

The CFI decision became final and executory but was not executed. 24 years thereafter, the OSG filed a complaint for revival of judgment and cancellation of titles before the RTC

Shipside filed a Motion to Dismiss on the grounds, among others,

RP is not the real party-in-interest because the real property covered by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace (Wallace Air Station), were under the ownership and administration of the Bases Conversion Development Authority (BCDA) under Republic Act No. 7227;

(3) plaintiffs cause of action is barred by prescription

The Motion to dismiss was denied by the CFI hence petitioner instituted a petition for certiorari and prohibition with the CA which dismissed the petition on the ground that the verification and certification in the petition, under the signature of Lorenzo Balbin, Jr., was made without authority of the Board of Directors

ISSUES

(1) WON the Republic of the Philippines is the real party in interest NO

(2) WON BCDA (the transferee) is a mere agent of the government NO(3) WON Lorenzo Balbin had authrority to sign the verification and certification of non-forum shopping. YES, defect cured. Technical rules relaxed by court

(the first two issues would determine whether the action for revival filed by the OSG is imprescriptible)RULING

1) NO.

With the transfer of Camp Wallace to the BCDA by virtue of RA 7227, the government no longer has a right or interest to protect. Being the owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority, not the Government, which stands to be benefited if the land covered issued in the name of petitioner is cancelled.

2) NO.

BCDA is not a mere agency of the Government but a corporate body performing proprietary functions. It isinvested with a personality separate and distinct from the government. (Section 3 of Republic Act No. 7227)

The promotion of economic and social development of Central Luzon, in particular, and the countrys goal for enhancement, in general, do not make the BCDA equivalent to the Government.Other corporations have been created by government to act as its agents for the realization of its programs, the SSS, GSIS, NAWASA and the NIA, to count a few, and yet, the Court has ruled that these entities, although performing functions aimed at promoting public interest and public welfare, are not government-function corporations invested with governmental attributes. Conclusion:

The action is barred by extinctive prescription considering that such an action can be instituted only within ten (10) years from the time the cause of action accrues. (Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil Procedure)

Note: In any case, the portion in dispute now forms part of the property owned and administered by the Bases Conversion and Development Authority, it is alienable and registerable real property.

3) YES. Defect cured, technical rules relaxed by court.

The defect was cured when subsequent to such dismissal of the motion to dismiss, petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its board secretary The requirement regarding verification of a pleading is formal, not jurisdictional The court may order the correction of the pleading Furthermore, The merits of petitioners case should be considered special circumstances or compelling reasons that justify tempering the requirement in regard to the certificate of non-forum shopping. technical rules of procedure should be used to promote, not frustrate justice.

17) Camporedondo v. NLRC

Full Case Title: BALTAZAR G. CAMPOREDONDO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), Fifth Division, Cagayan de Oro City, THE PHILIPPINE NATIONAL RED CROSS (PNRC), represented by GOVERNOR ROMEO C. ESPINO and DR. CELSO SAMSON,respondents.[[ GR 129049 || Aug 6 1999 || Pardo, J. || Ceriorari ]]

Petitioner-plaintiff: Baltazar Camporedondo (dismissed employee)

Respondent-defendant: Philippine National Red Cross (PNRC) (employer government corporation)

Original Action:

Complaint for illegal dismissal

Disposition of Courts/Tribunals:

Labor Arbiter dismissed for lack of jurisdiction.

NLRC affirmed Labor Arbiter.

SC affirmed NLRC.

Facts:

Petitioner was employed with the respondent PNRC for several years. As administrator of the Surigao del Norte Chapter, his books were audited by a PNRC field auditor and he was found to be short in the sum of P109,000.

He was required by the PNRC Secretary to restitute the said amount. Instead, petitioner applied for early retirement from the service and requested the PNRC Secretary for a re-audit of his accounts by an independent auditor. The PNRC Secretary denied the request.

Petitioner filed a complaint for illegal dismissal, damages and underpayment of wages against the PNRC and its key officials.

Respondent PNRC filed motion to dismiss for lack of jurisdiction on the ground that it is a government corporation and its employees (who are government employees and who are members of the GSIS) such as herein petitioner fall under the jurisdiction of Civil Service Law and regulations.

Petitioner filed opposition to MTD, alleging that there was an ER-EE relationship between him (being a duly appointed paid staff) and the PNRC governed by the Labor Code.

The Labor Arbiter dismissed the complaint for lack of jurisdiction, finding that PNRC was a government corporation with an original charter (created by RA 95).

The Labor Arbiter denied MR.

Petitioner filed a notice of appeal with NLRC.

NLRC dismissed the said appeal and confirmed the decision of the Labor Arbiter.

Hence this petition.

Issues:

1) WON PNRC is a government corporation [YES]

2) WON the PNRC was impliedly converted to a private organization [NO]

Ratio:

1) YES, PNRC is a government owned and controlled corporation. It was formed by its own original charter under RA 95.

The test to determine whether a corporation is a GOCC:

Was the corporation created by its own charter for the exercise of a public function OR by incorporation under the general corporation law?

If YES, then it is a GOCC --> like herein PNRC.

Corporations with special charters are government corporations subject to its provisions, and its employees are under the jurisdiction of the Civil Service Commission. Said employees GOCCS are compulsory members of the GSIS.

2) NO, PNRC was not impliedly converted to a private corporation by the mere fact that its charter was amended to vest in it new powers such as:

to secure loans,

be exempted from payment of all duties, taxes, fees and other charges of all kinds on all importations and purchases for its exclusive use, on donations for its disaster relief work and other services and in its benefits and fund raising drives,

and be allotted one lottery draw a year by the Philippine Charity Sweepstakes Office for the support of its disaster relief operation in addition to its existing lottery draws for blood program.

Digesters note: Supreme Court offered no explanation to this.

Other notes:

Petitioner (having served in the Philippine National Red Cross for a number of years since his initial employment) himself knew that PNRC is a government corporation with its own charter and that he was covered by compulsory membership in the GSIS, which is why he could apply, as he did, for "early" retirement from the service under PD 1146 or RA 1616 which amended the PNRCs charter. His own actions belie his claim.

Petition dismissed. NLRC decision affirmed18) Strategic Alliance Development Corporation v. Radstock Securities Limited

Full Case Title: STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner, - versus - RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondents. ASIAVEST MERCHANT BANKERS BERHAD, Intervenor.

[[ GR 178158 || Dec 4 2009 || Carpio, J. || Ceriorari ]]

Facts:

The Philippine National Construction Corp. (PNCC) (previously Construction Devt Corp. Of the Philippines or CDCP) was incorporated under the Corporation Code.

In 1978 and 1981, Basay Mining Corp. (later CDCP Mining Corp.), an affiliate of PNCC, , obtained loans from Marubeni Corp wherein PNCC, without a board resolution authorizing the same, obliged to pay solidarily with Basay. For 20 years, PNCC consistently refused to admit liability for the Marubeni loans. However, in October 2010, PNCC passed a board resolution recognizing a P 10.7 billion liability to Marubeni Corp. 3 months later, Marubeni assigned its credit to Radstock for only US$ 2 million (or less than P 100 million, in stark contrast to the P10.7 billion admitted receivable from PNCC).

Radstock immediately started actions for the collection of the amount. TC issued a writ of preliminary attachment against PNCC and garnished the latters bank accounts and real properties. It denied PNCCs MTD. CA also denied PNCCs petition for certiorari.

Later, PNCC and Radstock entered into a compromise agreement whereby PNCC shall pay a reduced amount of P6.185 billion instead of the total amount of the debt, which as of 2006 has ballooned to P17 billion. COA found the terms of the compromise as fair and above board. The CA also approved it.

This case is the consolidation of petitions for review made by Strategic Alliance Development Corporation (STRADEC) and Luis Sison (a stockholder and former PNCC President and Board Chairman), as well as the motion to intervene made by Asiavest, a judgment creditor of PNCC. These parties stand to be injured by the PNCCs acknowledgment of debt to Marubeni and the disputed compromise agreement.

In the SC, the bone of contention was the PNCC Boards power to compromise the obligation. To resolve that question, it must first be determined if PNCC is a GOCC or an autonomous entity that is just like any private corporation."

Issues:

1) WON PNCC is a GOCC [YES]

2) WON the compromise agreement made by PNCC with Marubeni is void [YES]

Ratio:

1) Yes, PNCC is a GOCC.

PNCC may not compromise the obligation. Under the Revised Administrative Code2 (RAC), compromise of claims from a government agency exceeding P100,000 must be submitted to Congress. The Administrative Code applies to PNCC because it is a government agency. It is a government agency because PNCC is a GOCC. As provided in Sec. 2 on the Introductory Provisions of the RAC, agency of the government refers to any of the various unit of the government, including a...GOCC....

The dissenters position that PNCC has the power to compromise because it was incorporated under the Corporation Code and is therefore an autonomous entity and is just like any other private corporation is wrong. PNCC is not just like any other private corporation because it is indisputably a GOCC. Neither is PNCC an autonomous entity because it is under the DTI, over which the President exercises control.

Furthermore, the dissenters assertion that PNCC is an autonomous entity is inconsistent with its position that Sec. 36(2) of the Government Auditing Code is the governing law determining PNCCs power to compromise. The same provision states that it applies to governing bodies of GOCCs. The phrase GOCC refers to both those created by special charter as well as those incorporated under the Corporation Code. As held in Felciano v COA, the COAs jurisdiction extends not only to government agencies or instrumentalities but also to GOCCs with original charters and other GOCCs without original charters (i.e., those created under the Corporation Code but are owned and controlled by the government).

Thus, PNCC is a GOCC. As such, it is a government agency to which the provisions of RAC regarding compromises apply. Therefore, it has no power to compromise the Marubeni loan. Only the Congress can do so. Since the compromise agreement was not approved by congress, it is void.

Petition granted. CA decision set aside. PNCC board resolutions admitting liability for the Marubeni loans VOID AB INITIO. Compromise Agreement between PNCC and Radstock declared INEXISTENT AND VOID AB INITIO.

19) PNOC- Energy Devt Corp v. NLRC and Danilo Mercado

Paras, 1991

Facts

Danilo Mercado was first hired as a clerk by PNOC-EDC and was a shipping clerk when he was dismissed by the company due to serious acts of dishonesty and violation of company rules and regulations. He filed an illegal dismissal case against the company, and the company filed for the dismissal of the case since it alleges that the labor arbiter had no jurisdiction over the company because it is a corporation wholly owned and controlled by the government, and that the civil service code governs in this case.

Issue

WON the labor arbiter has jurisdiction over the case

WON Mercado was illegally dismissed

Held:

YES. Under the 1987 constitution, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation, such that government corporations created by special charter are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage.

Specifically, the PNOC-EDC having been incorporated under the General Corporation Law was held to be a government owned or controlled corporation whose employees are subject to the provisions of the Labor Code.

The fact that the case arose at the time when the 1973 Constitution was still in effect, when PNOC-EDC was still considered to be under the civil service law, does not deprive the NLRC of jurisdiction on the premise that it is the 1987 Constitution that governs because it is the Constitution in place at the time of the decision.

YES. The court found no evidence of the allegations of the company regarding Mercado, and ruled that he was illegally dismissed.

2.As to place of incorporation

3.As to purpose

4. As to number of members

20) THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC. v. LRC and THE REGISTER OF DEEDS OF DAVAO CITY

Felix, 1957

Facts

Mateo Rodis executed a deed of sale of a parcel of land in favor of the Roman Catholic Apostolic Administrator of Davao Inc., a corporation sole with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. The deed of sale was then presented to the RD of Davao city, the RD then required Roman Catholic to prepare an affidavit to the effect that 60 per cent of the members of their corporation were Filipino citizens, having in mind a previous resolution wherein Carmelite nuns were required to submit a similar affidavit. Roman Catholic agreed to submit an affidavit, but not in the same tenor as the nuns have submitted since it contended that it is a corporation sole, as opposed to the nuns who had 5 incorporators and that the piece of land that is the object of the sale will be for the benefit of the entire catholic population of Davao, and not a personal property of the corporation as in the case of the nuns. The case was referred to the Land Registration Commissioner, and ruled that the vendee was not qualified to acquire private lands without proof that at least 60% of the corporation are owned or controlled by Filipino citizens. The Roman Catholic then filed a petition for mandamus seeking the reversal of the decision of the LRC.

Issue

Is the corporation sole entitled to acquire private lands in the Philippines, given that the incumbent of the corporation was a Canadian citizen?

Held

YES. The bishops or archbishops, as the case may be, as corporation's sole are merely administrators of the church properties that come to their possession, in which they hold in trust for the church. Church properties acquired by the incumbent of a corporation sole pass, by operation of law, upon his death not his personal heirs but to his successor in office. It could be seen, therefore, that a corporation sole is created not only to administer the temporalities of the church or religious society where he belongs but also to hold and transmit the same to his successor in said office. Since there is undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of Davao are predominantly Filipino citizens, the evidence presented is sufficient to establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the Constitution.5.As to existence of shares: Stock, Non Stock Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears n the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article 315 (1 (b)) of the Revised Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense.

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